Post by WestonKevTMP on May 17, 2019 13:44:34 GMT
Comrades,
We continuously review our loan portfolio performance to ensure that credit losses remain within our risk appetite, to reward lenders with a return matching expectations. The platform has been operating for over 2 years and has now matched sufficient volumes to allow us to make improved analytically driven risk decisions and implement improvements to the scoring models. This led to a significant number of changes to risk credit policy and operational factors in July 2018.
Although we've always been making changes, this was a significant milestone to the way we manage credit risk,
The current returns as an IRR for lenders since July 2018 is 11.3% per annum for loans written July 2018 to January 2019 (i.e. completed loan cohorts, which is why Feb 2019 onwards isn't included yet). We will be publishing returns later in the year on our website but wanted to give forum members notice as we know many of our lenders found us through this site. All of our loans are for 3 months term or less, and so all loans up to January 2019 have now all passed their final payment dates. So they are either fully repaid, non-performing, or on a payment plan. We calculate the lender IRR as the cash received to date from borrowers on all loans in this period, and this is the actual 11.3% pa. annualised.
No subjective assumptions are made in this IRR calculation as to the final repayment amount of a loan or default rates. We are still receiving payments on some of these loans on payment plans and defaults, but this means the picture should only get better because the IRR is calculated based on cash received to date. For this loan cohort, the IRR of 11.3% is a minimum. I would estimate that a subsequent 12 month period (few plans are longer than this) is required to see the true final IRR.
Monthly cohort IRRs will of vary due to the statistically small numbers and also with seasonality, but we are managing the business to deliver steady returns over a period of time. It is worth caveating that we don’t force diversification through multiple loans, fractionalise loans between lenders or use a Provision Fund. As a result the 11.3% is an average for lenders, which significant individual deviations from this average. Lenders with small number of loans for restricted periods will experience dramatically different returns to the average. Any questions on individual performance should be communicated to the helpdesk, and will not be discussed on a public forum.
Unfortunately our early portfolio under performed versus what we are now delivering, although we continue to see money returned to lenders on these historic loans through recoveries. Volatility in the first year was extreme as we built volume and changed credit policy to be specific to our borrowers rather than be reliant on generic rules or scores. For full disclosure, the management team here are all lenders on the platform too (we join the queue, the same as all other Lenders), as are a number of our shareholders. I myself was an early lender and didn’t enjoy the returns that are now being delivered.
Although depending somewhat on the luck of which loans were allocated, some lenders did enjoy double digit IRR returns.
My favourite description of The Money Platform on the forum was that we were the "roller coaster of P2P lending", and I think this was true. Capital is at risk and there is no FSCS protection. I personally only invest a small fraction of my invest able assets on any single P2P site, and would not use my ISA allowance where the risk is higher.
Kevin.
We continuously review our loan portfolio performance to ensure that credit losses remain within our risk appetite, to reward lenders with a return matching expectations. The platform has been operating for over 2 years and has now matched sufficient volumes to allow us to make improved analytically driven risk decisions and implement improvements to the scoring models. This led to a significant number of changes to risk credit policy and operational factors in July 2018.
Although we've always been making changes, this was a significant milestone to the way we manage credit risk,
The current returns as an IRR for lenders since July 2018 is 11.3% per annum for loans written July 2018 to January 2019 (i.e. completed loan cohorts, which is why Feb 2019 onwards isn't included yet). We will be publishing returns later in the year on our website but wanted to give forum members notice as we know many of our lenders found us through this site. All of our loans are for 3 months term or less, and so all loans up to January 2019 have now all passed their final payment dates. So they are either fully repaid, non-performing, or on a payment plan. We calculate the lender IRR as the cash received to date from borrowers on all loans in this period, and this is the actual 11.3% pa. annualised.
No subjective assumptions are made in this IRR calculation as to the final repayment amount of a loan or default rates. We are still receiving payments on some of these loans on payment plans and defaults, but this means the picture should only get better because the IRR is calculated based on cash received to date. For this loan cohort, the IRR of 11.3% is a minimum. I would estimate that a subsequent 12 month period (few plans are longer than this) is required to see the true final IRR.
Monthly cohort IRRs will of vary due to the statistically small numbers and also with seasonality, but we are managing the business to deliver steady returns over a period of time. It is worth caveating that we don’t force diversification through multiple loans, fractionalise loans between lenders or use a Provision Fund. As a result the 11.3% is an average for lenders, which significant individual deviations from this average. Lenders with small number of loans for restricted periods will experience dramatically different returns to the average. Any questions on individual performance should be communicated to the helpdesk, and will not be discussed on a public forum.
Unfortunately our early portfolio under performed versus what we are now delivering, although we continue to see money returned to lenders on these historic loans through recoveries. Volatility in the first year was extreme as we built volume and changed credit policy to be specific to our borrowers rather than be reliant on generic rules or scores. For full disclosure, the management team here are all lenders on the platform too (we join the queue, the same as all other Lenders), as are a number of our shareholders. I myself was an early lender and didn’t enjoy the returns that are now being delivered.
Although depending somewhat on the luck of which loans were allocated, some lenders did enjoy double digit IRR returns.
My favourite description of The Money Platform on the forum was that we were the "roller coaster of P2P lending", and I think this was true. Capital is at risk and there is no FSCS protection. I personally only invest a small fraction of my invest able assets on any single P2P site, and would not use my ISA allowance where the risk is higher.
Kevin.
